The de minimis exemption is one of the most overlooked yet impactful trade policies affecting American manufacturing today. It allows imports valued under $800 to enter the U.S. duty-free and with minimal customs oversight, making it a major factor in the rise of e-commerce and direct-to-consumer sales from foreign companies.
While originally designed to simplify low-value shipments, the exemption has become a contentious issue. Critics argue it gives foreign manufacturers—especially those in China—an unfair advantage over American businesses, allowing them to bypass tariffs, safety regulations, and labor protections. As a result, the de minimis rule has become a flashpoint in trade policy, with the Biden and Trump administrations and members of Congress pushing for reforms to close the loophole.
In this article, we’ll break down what de minimis is, how it impacts American manufacturing, and the latest legislative efforts to address the issue.
What is De Minimis?
At its core, de minimis is a trade rule that exempts low-value imports from customs duties, tariffs, and rigorous inspections. In the U.S., the de minimis threshold is $800, meaning any shipment valued at or below this amount can enter the country duty-free.
This policy was intended to:
- Reduce administrative burdens on Customs and Border Protection (CBP) by avoiding unnecessary processing of small shipments.
- Speed up e-commerce shipments, benefiting online retailers and consumers.
- Encourage cross-border trade by removing trade barriers for low-value items.
However, while this rule makes it easier for American consumers to receive cheap goods quickly, it has also created a massive loophole that foreign sellers—especially Chinese e-commerce giants like Shein, Temu, and Alibaba—have exploited to flood the U.S. market with low-cost products.
How does the U.S. compare to other countries?
- Canada’s de minimis threshold: CAD $20 (~$15 USD)
- European Union’s de minimis threshold: €150 (~$165 USD)
- China’s de minimis threshold: ¥50 (~$7 USD)
With the U.S. having one of the highest de minimis thresholds in the world, critics argue it is disproportionately harming American manufacturers by giving foreign companies an unfair advantage.
How De Minimis Affects American Manufacturing
The de minimis exemption has significant consequences for American manufacturing, supply chains, and trade policy.
1. A Boon for Foreign E-Commerce Giants
Companies like Shein, Temu, and Alibaba thrive under de minimis because they can ship millions of low-value packages directly to American consumers without paying tariffs or undergoing customs inspections.
Since these foreign businesses don’t have to comply with U.S. labor laws, environmental standards, or safety regulations, they can offer goods at much lower prices than American manufacturers, undercutting domestic companies.
2. A Competitive Disadvantage for U.S. Manufacturers
While American made goods are subject to tariffs, labor regulations, and safety standards, foreign competitors avoid these costs by using de minimis. This creates a trade imbalance where:
- American manufacturers face higher production and regulatory costs.
- Foreign companies, particularly in China, gain an artificial price advantage over U.S. businesses.
- Domestic production declines, as consumers opt for cheaper imports.
3. The Rise in Unregulated Imports
The de minimis exemption allows millions of uninspected packages to enter the country daily. This has led to:
- Counterfeit goods flooding the market (including fake luxury products, electronics, and pharmaceuticals).
- Products failing to meet U.S. safety standards (such as toxic children’s toys or unregulated cosmetics).
- Goods made with forced labor slipping past enforcement efforts.
4. The Supply Chain Disruption
Rather than strengthening domestic supply chains, de minimis encourages dependency on foreign suppliers. This reliance on cheap, tariff-free imports has weakened U.S. manufacturing sectors like textiles, electronics, and consumer goods.
The De Minimis Loophole and Its Controversy
The biggest controversy surrounding de minimis is that China is its biggest beneficiary. Chinese companies strategically use de minimis to sidestep tariffs by shipping small, direct-to-consumer packages, avoiding the scrutiny that bulk shipments face.
How the Loophole is Exploited:
- Breaking up large shipments into multiple packages under $800 to avoid duties.
- Misdeclaring package values to keep them under the threshold.
- Bypassing customs enforcement and U.S. trade laws, leading to illegal or unsafe goods entering the country.
U.S. Customs and Border Protection (CBP) has acknowledged that the sheer volume of de minimis shipments makes enforcement extremely difficult, allowing a flood of unregulated goods into the U.S. market.
Calls for Reform and Legislative Action
Bipartisan Concern Over De Minimis Abuse
Lawmakers from both parties recognize that de minimis is harming American manufacturers. Key concerns include:
- The unfair trade advantage given to foreign retailers.
- The importation of counterfeit and unsafe goods.
- The lack of customs oversight, making it difficult to enforce trade laws.
The White House’s Push to Close the Loophole
- Eliminating de minimis benefits for non-market economies like China.
- Enhancing customs enforcement to prevent abuse.
- Blocking shipments tied to forced labor and counterfeit goods.
Congressional Legislation to Reform De Minimis
Several bills have been introduced to fix the issue:
- The Import Security and Fairness Act
- Would ban Chinese companies from using the de minimis exemption.
- The Ending China’s De Minimis Loophole Act
- Would eliminate de minimis benefits for China and Russia.
- Lowering the de minimis threshold from $800 to $200 to align with international standards.
Industry Reactions: Divided Opinions
- U.S. manufacturers and labor unions support reform to protect domestic jobs and businesses.
- Retailers and e-commerce platforms oppose changes, arguing it would raise prices and slow deliveries.
What Happens Next?
- The White House is expected to push forward with executive actions if Congress does not pass reforms.
- CBP is preparing stricter enforcement of de minimis shipments.
- If reforms pass, American manufacturing could see a revival, but consumers may experience higher prices on imported goods.
What This Means for Consumers and Businesses
- For Consumers: Prices on cheap foreign goods may increase if reforms pass.
- For Small Businesses: A more level playing field for domestic manufacturers.
- For Large Corporations: Some will need to rethink supply chains and pricing models.
De Minimis Abuse Must Be Stopped
The de minimis exemption was originally meant to simplify trade, but it has become a loophole benefiting foreign manufacturers at the expense of American industry. With bipartisan efforts to close the loophole, the U.S. is at a turning point in trade policy, consumer pricing, and the future of American manufacturing.
